The chief operating officer of the world's biggest fixed-interest manager says the United States equities market is "a little out over its skis" in the way it has priced in the robust recovery from the financial crisis.

Doug Hodge, of Pacific Investment Management Company (Pimco), has briefed senior figures in New Zealand on his company's vision on "the new normal" for the world after the global financial crisis.

In Wellington last week, Hodge met fund managers, other industry figures and our Government on Pimco's vision. With a huge uncertainty over what will happen when Governments and central banks withdraw stimulus and economic support packages in coming months, and the sovereign debt fears centred on Greece, Pimco believes significant downside risk continues to haunt the developed world's economy and, as the Winter Olympics has illustrated, pushing your luck in hazardous conditions invites disaster.

Hodge, with Pimco's New Zealand boss Tony Hildyard, spoke to the Business Herald just before their meeting with Finance Minister Bill English.

Pimco's view is the global economy is not yet out of the woods. "We're not in the emergency room any more. We've come through life-saving surgery but we're still in recovery."

That, he says, is at odds with what has happened in equity markets over the past year.

"There's this view being reflected in asset prices that the global economy is going to return to full strength. We would argue that that will eventually happen but we're on a slow path to recovery and rehabilitation.

"There are still these structural challenges that have yet to be resolved and the policy tools available to many of the developed countries are limited and growing increasingly limited."

Those tools, including quantitative easing, or rapidly expanding an economy's money supply, were not meant to be permanent.

"How we exit introduces a huge degree of uncertainty yet the market has priced in this very smooth transition."

If that wasn't enough to contend with, banks and households are being urged to de-leverage their balance sheets, and the global economy is moving from a unipolar world led by the US to a multipolar world.

Even as the financial crisis unfolded many of the developing economies have reached "critical mass". Pimco has been generating headlines as it deploys more of its US$1 trillion under management into developing economies' fixed-interest securities, most notably Brazil's.

Meanwhile, the West's key institutions, including the Federal Reserve, FDIC and SEC in the US and the Bank of England and Financial Services Authority in Britain among others, "haven't adjusted to new realities and don't have the structures and policy tools to manage through the transition".